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Sunday May 19, 2024
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Power and Energy Minister Kanchana Wijesekera on Saturday revealed multiple initiatives harnessing private sector investment to ensure Sri Lanka achieves energy security.
Wijesekera said a legal framework necessary for the private stakeholders to take part, invest and also secure the investment in the energy sector is being actioned. He reiterated that the policy of the Government under President Ranil Wickremesinghe is to boost the share of renewable energy to 70% by 2030 from 40% at present. This needs a massive amount of investments in terms of foreign direct investment and we are looking at about $11.5 billion,” between now and 2030.
“Of that $ 5. 5 billion dollars will be on infrastructure development and about $6 billion for development of generation, transmission and distribution lines. So there›s a massive amount of availability in terms of investments that we›ve forecasted. We›re looking at about 5,000 additional megawatts of renewable energy by 2030 and I would say we are well on our way to achieving those targets with some of the new schemes that we have introduced,” Wijesekera told the Daily FT co-partnered webinar titled “Is Sri Lanka ready for investment” on Saturday.
To achieve the renewable energy goals, the Minister who was a panellist said two plans have been completed with one spanning 2023 to 2026 and another from 2026 to 2030. These plans focus on integrating renewable energy from the existing grid and required infrastructure development including developing transmission line/grid development.
One important scheme is the new feeding tariff formula that has been introduced taking into account the exchange variation, inflation, interest rates so that the investors risk is mitigated. According to him, lack of flexibility was one of the biggest concerns some of the developers had. Some of the tendered projects in the last three years could not go ahead because some of them could not recover the investment on the feeding tariff that was extended to them.
“Developers and investors have the option of a fixed tariff formula or a variable one. If the investors feel uncomfortable at the economic situation in Sri Lanka they could still go for the variable option where every three months the parameters would be adjusted based on CBSL and Treasury data such as inflation, interest and exchange rates so that the investor doesn’t lose out in investing in Sri Lanka,” Wijesekera said.
He emphasised how cost-reflective pricing is transforming the energy sector. “A lot of investments that should have taken place in the past did not get implemented because investors were not sure whether the Government had the ability to pay back. With the cost-reflective pricing which was a massive challenge for the Government, we have brought confidence for the investor ensuring investments have the ability to be paid,” the Power and Energy Minister explained.
Another important aspect is that investors would also be able to take part in the distribution of electricity. “Right now the distribution is 100% Government monopoly which we hope the CEB-4 distribution divisions plus the Government owned Lanka Electrical Company (LECO) will be made available for public private partnerships or complete private partnerships depending on the decision of the cabinet of ministers,” Wijesekera added.
“We have given now the opportunity for investors who are willing to invest not just on the development but on the transmission lines and the grid development as well to work on a fee basis so that they can speed things up on their development and also recover the money of the investment,” he stressed.
With regard to the petroleum sector, Minister Wijesekera said the Government is keen to get private investors or large energy companies to take part in downstream development of the industry. Apart from Lanka IOC, the Government has approved China’s Sinopec and US-based RM Parks Inc. in collaboration with Shell, and United Petroleum from Australia to take part in the domestic retail sales. He revealed Sinopec is slated to start operations by the end of July and the other will follow suit.
Wijesekera said that the Government is also pursuing plans to build the second oil refinery which had been under discussion for decades. “We have issued a Request for Proposals (RFPs) following the call for Expression of Interests (EOIs),” he revealed. Earlier Wijesekera separately disclosed that Singapore’s Vitol and China’s Sinopec were short listed to build the refinery.
The Minister told the webinar on Saturday that the new refinery will tap potential for exports within the region as well. This move is in addition to LIOC developing the 14 tanks in Trincomalee and the Government looking at developing a further 60 tanks.
“We are keen to make Sri Lanka energy independent whether it’s in terms of renewable energy or in terms of gas and oil. We are not just looking at downstream investments but we will be shortly advertising for the upstream investments as well,” Minister Wijesekera revealed.
He also referred to plans to boost green hydrogen and offshore wind farms as well; the potential of the latter far exceeds Sri Lanka’s requirements as per a World Bank report. He said Sri Lanka has potential for about 40 gigawatts hours of wind energy offshore.
Speaking about regional initiatives Wijesekera said interconnectivity with India and BIMSTEC countries is being explored to share excess energy.
“This is the best time to Invest in Sri Lanka’s energy sector,” he added, indicating the necessary legal framework was being prepared.
Separately Minister Wijesekera held a meeting with the development agencies to discuss the progress and the next steps on the CEB reforms. The final draft of the new Electricity Act has been handed over to the Legal Draftsman’s office for clearance and will be submitted to the Cabinet of ministers approval once the certification of the AG is received. He also said the Power Sector Reform Secretariat will be established to implement the transition plan with the financial and technical assistance of the development agencies.
Apart from the Daily FT, the International Chamber of Commerce Sri Lanka, Sri Lanka Institute of Directors, Colombo University MBA Association, Employers Federation of Ceylon, CIMA, ACCA and CA were the other partners of the “Is Sri Lanka ready for investment?” webinar. It included keynotes by President Ranil Wickremesinghe, Central Bank Governor Dr. Nandalal Weerasinghe, Former Norway Minister Erik Solheim. Panellists were Sri Lanka High Commissioner-designate to United Kingdom Rohitha Bogollagama, Deputy Japanese Ambassador to Sri Lanka Kotaro Katsur, Deputy Australian High Commissioner to Sri Lanka Lalita Kapur, Sri Lankan Ambassador to the United Arab Emirates Udaya Indrarathne, Pemandu Associates Executive Vice President and Partner Ridzwan Hamzah, CHEC Port City Colombo Ltd., Managing Director Yang Lu, Ideal Group Deputy Chairman Aravinda De Silva and Employers Federation of Ceylon Chief Executive Officer Vajira Ellepola.
